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February 5, 2013

Advisors Struggle to Serve Aging Boomers: Report

New research analyzes key challenges advisors face as boomer clients 'grow in importance'

Baby boomers are becoming their parents—that is, difficult.

Despite serving a growing number of retirement income clients, financial advisors are challenged with how to effectively attract and engage with investors nearing or in retirement. Advisors also remain divided as to the best way to generate sustainable income. These are the key findings of a new research report from GDC Research and Practical Perspectives, two Boston-based independent consulting and competitive intelligence firms.

The report, titled “Retirement Income Insights 2013–Attracting and Engaging Retirement Income Clients” reveals that while retirement income clients are highly important to most financial advisors, many still do not have the skills to address basic issues such as setting realistic expectations or educating investors on what retirement really involves.

“The delivery of retirement income is full of contradictions,” Howard Schneider, president of Practical Perspectives, said in a statement. “It is a critical and growing element of most advisor practices today, and many have developed some processes and tools to serve these types of clients. Yet advisors still need help with fundamental elements of retirement income support, especially with how to identify prospective clients and interact with them on key topics.”

Advisors also have yet to coalesce around a “common methodology” for generating retirement income, with three core approaches prominent across the marketplace. Although most advisors are highly confident in their abilities to serve retirees, many lack capabilities to help retirees deal with common topics such as Social Security, Medicare or elder care.

“Advisors working with retirement income clients are most concerned with how economic uncertainty, rising taxes and the potential for increased inflation can undermine a plan,” added GDC Research president Dennis Gallant. “Advisors are not as concerned with the possibility of rising interest rates and the threat this could pose to retirement income portfolios. While they are open to new solutions, most advisors are generally satisfied with the range of products available to help them serve retirement income clients.”

Other highlights of the report include:

More than 70% of advisors increased the number of retirement income clients they serve in the past 12 months.

29% of advisors expect demand for retirement income support to increase significantly in the next 12 to 24 months.

The risk-adjusted total return approach is used to generate income by 40% of advisors, with the remainder of the users split among the pooled or time-segmented approach and the income floor methodology.

64% of advisors perceive that the low-interest-rate environment has impacted how they serve retirement income clients.

Roughly 1 in 3 advisors expect to increase use of variable annuities, ETFs and alternative investments in managing retirement income assets.